Ukraine “
Ukraine has one of the strictest currency control regimes in Europe
transactions which allow transfer of a foreign cur- rency from Ukraine and an exhaustive list of doc- uments to be provided to a respective bank for the performance of the transfer.
Laws under development There are a number of areas of corporate law which are still under-developed. Among these are corpo- rate governance issues, protection of the rights of shareholders (especially minority shareholders) and disclosure of information. While some of the issues are related to the fact that provisions of various laws and other regulations are either outdated or over- lapping, and there is sometimes a lack of coordina- tion between them, certain issues are not governed at all. It will require quite some time before relevant regulation is enacted. When comparing the rules regulating the
activity of limited liability companies (LLCs) and joint-stock companies – the most popular forms of company incorporated in Ukraine – it is clear that the latter enjoys a far higher level of statuto- ry regulation. The rules related to LLCs have not changed significantly since 1991 and are long overdue modernisation. The basic legislative act regulating competition
in Ukraine is the Law of Ukraine on Protection of Economic Competition, adopted on January 11 2001. The law provides the main principles, con- cepts and procedures for merger control and reg- ulation of concerted actions and dominance. The Antimonopoly Committee of Ukraine
(AMCU) provides state protection of competi- tion, and its status is determined by the Law of Ukraine on the AMCU, adopted on November
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26 1993. One of the main targets of the AMCU is to make decisions concerning abatement of competition legislation breaches, which are oblig- atory for enterprises and state authorities; to allow or prohibit concerted actions in the market; and to impose fines or apply other sanctions with respect to those who breach the rules of fair com- petition. For a number of reasons certain commercial
contracts in Ukraine are typically governed by for- eign laws. This is especially true for shareholders’ agreements, which due to loose domestic protec- tion of the rights of minority shareholders, are typically concluded under English, Cyprus or other foreign laws. In foreign economic contracts, parties also prefer to opt for foreign laws: this typ- ically gives more comfort to the parties as to unbi- ased dispute resolution. Although sometimes par- ties do choose Ukrainian law, the general trend is unlikely to change in the next several years. Recent trends show increasing activity and
improving professionalism in the AMCU’s departments with regard to fighting monopolisa- tion, cartelisation, deceptive advertising and other unfair business practices of all sorts. The trend has been naturally accompanied by a growing number of inspections (frequently in the form of so-called dawn raids) and businesses being under investiga- tion, with fines of unprecedented size imposed. These trends, and the excessive influence of
the political environment on Ukrainian antitrust regulations, have resulted in a great demand for immediate and competent legal representation in complex antitrust cases – both in the AMCU and in the courts.
Recipe for success Despite the risks, the investment opportunities and possibilities in Ukraine will continue to attract foreign investors. The potential profit is much higher than in countries with more mature economies. Counsel should, however, familiarise them-
selves with the current hot topics in Ukraine: the anti-money-laundering rules, currency control issues (important for every company doing busi- ness with foreign legal entities) and protection of personal data. Being a member of a lobby group can also be
helpful for foreign investors. Domestic large busi- ness groups have their own lobbies in the Ukrainian parliament and other state authorities. While there are regional chambers of commerce and industry in each region of Ukraine, they appear not to be very effective in defending and promoting the interests of the business communi- ty, especially those of the foreign investors doing business in Ukraine. Among the most effective lobbies of foreign businesses operating in Ukraine are the American Chamber of Commerce and the European Business Association. While the American Chamber is located in Kiev, it regularly holds events in various regions of the country. The EBA, on the other hand, has regional offices oper- ating in a number of the largest cities throughout Ukraine. Both of these organisations have various committees, hold regular meetings with different state bodies and organise a range of social events for their members. It is very common that a for- eign business is a member of one or even both of these organisations. There is no single piece of advice on how to
succeed in the country, but it is relatively simple to mitigate the risks: choose your business part- ners in Ukraine carefully (do the necessary due diligence checks), never forget to have all docu- ments in order and always seek qualified legal advice. If you overlook certain risks now, they may be turned against you later.
IFLR“
www.iflr.com
What I find particularly intriguing about IFLR is its ability to stay on top on developments and trends, always one step ahead of and different
from any competitor. Peter L Brechan, partner, Haavind Vislie
IFLR|FOREIGN DIRECT INVESTMENT 043
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